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MWANYASI: Santa may come but still do your investment homework

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Ideas & Debate

Guests follow proceedings during an investors
Guests follow proceedings during an investors briefing hosted by a NSE-listed firm. PHOTO | SALATON NJAU | NMG 

It’s been a rough year. Markets are back to where they began in 2017. The NSE 20 share has shed more than 1,000 points from its peak in March. Year to date, stocks have shed over 22 percent of their value to 2,799.

Year to June, 70 percent of the stock brokers were already in the red, 30 percent of investment bankers and advisers had also booked losses and industry revenues had dropped by eight percent, according to Capital Markets Soundness Report Volume 8.

But this is December; should we hope on Santa Claus coming to town? Should we wish for a “Santa Claus Rally” — when stock market rallies during December, usually, in the last three weeks of the month — to rescue stocks? Most certainly.

“He” might give us a chance to recover from quite a beating this year. And since nothing else appears able to stem the market’s carnage, why not bet on Him. Big question is; has Santa delivered in the past?

To illustrate, consider last year. The NSE 20 share closed at 3,695 on the 21st of December 2017 before Christmas day, and between then and the end of 2017 its highest close was 3,712 — 0.5 percent higher.

That represents the maximum rally potential for the Santa Claus Rally period for a trader with perfect timing. Let’s analyse the previous nine years.

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In 2016, the market rallied 1.5 percent to close at 3,084 points. Similarly, in 2015, 2014, 2013 and 2012, shares rallied 0.96 percent, four percent, 0.72 percent and 0.6 percent respectively in the closing days of these years.

Shares also pulled up two percent, 0.45 percent, 1.1 percent and 5.3 percent in the 2011, 2010, 2009 and 2008 (market remained closed on the 31st but opened in January 2 2009) respectively. A 1.7 percent average one-month gain certainly is not mouth-watering but nonetheless proves the theory works.

Why does the theory work? In 2016, FINRA, citing research from the Journal of Financial Planning, highlighted that the holiday cheer tends to put investors in an optimistic mood, and their optimism often causes them to be bullish on stocks.

The same study also indicates that businesses and governments may be less likely to release bad news during this period, another factor that may spur investor optimism.

More interestingly still, the study also found patterns of Santa Claus rallies in Asian countries (Japan, Singapore, Indonesia and Taiwan) with small Christian populations, and thus limited Christmas celebrations.

Bargain-hunters are also cited as one of the reason why stock push upwards during this season.

What’s also interesting, since 1950, according to Jeffery Hirsch’s book: The Stock Trader’s Almanac, the S&P 500 index has delivered an average return of 1.4 percent during this period — notice how the figure is close to what NSE 20 share index has generated in the last decade.

Will Santa Claus come to NSE this time? It’s highly probable. However, there’s no guarantee the market will follow a similar path this time around. Investors must take other factors into consideration when making investment decisions.

Focusing on the absence (or presence) of a Santa Claus rally is over-simplifying the markets.

That said, for those investing this holiday season, Santa Claus could have a gift for you. Happy Holidays.

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World Bank pushes G-20 to extend debt relief to 2021

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World Bank Group President David Malpass has urged the Group of 20 rich countries to extend the time frame of the Debt Service Suspension Initiative(DSSI) through the end of 2021, calling it one of the key factors in strengthening global recovery.

“I urge you to extend the time frame of the DSSI through the end of 2021 and commit to giving the initiative as broad a scope as possible,” said Malpass.

He made these remarks at last week’s virtual G20 Finance Ministers and Central Bank Governors Meeting.

The World Bank Chief said the COVID-19 pandemic has triggered the deepest global recession in decades and what may turn out to be one of the most unequal in terms of impact.

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People in developing countries are particularly hard hit by capital outflows, declines in remittances, the collapse of informal labor markets, and social safety nets that are much less robust than in the advanced economies.

For the poorest countries, poverty is rising rapidly, median incomes are falling and growth is deeply negative.

Debt burdens, already unsustainable for many countries, are rising to crisis levels.

“The situation in developing countries is increasingly desperate. Time is short. We need to take action quickly on debt suspension, debt reduction, debt resolution mechanisms and debt transparency,” said Malpass.

ALSO READ:Global Economy Plunges into Worst Recession – World Bank

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Kenya’s Central Bank Drafts New Laws to Regulate Non-Bank Digital Loans

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The Central Bank of Kenya (CBK) will regulate interest rates charged on mobile loans by digital lending platforms if amendments on the Central bank of Kenya Act pass to law. The amendments will require digital lenders to seek approval from CBK before launching new products or changing interest rates on loans among other charges, just like commercial banks.

“The principal objective of this bill is to amend the Central bank of Kenya Act to regulate the conduct of providers of digital financial products and services,” reads a notice on the bill. “CBK will have an obligation of ensuring that there is fair and non-discriminatory marketplace access to credit.”

According to Business Daily, the legislation will also enable the Central Bank to monitor non-performing loans, capping the limit at not twice the amount of the defaulted loan while protecting consumers from predatory lending by digital loan platforms.

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Tighter Reins on Platforms for Mobile Loans

The legislation will boost efforts to protect customers, building upon a previous gazette notice that blocked lenders from blacklisting non-performing loans below Ksh 1000. The CBK also withdrew submissions of unregulated mobile loan platforms into Credit Reference Bureau. The withdrawal came after complaints of misuse over data in the Credit Information Sharing (CIS) System available for lenders.

Last year, Kenya had over 49 platforms providing mobile loans, taking advantage of regulation gaps to charge obscene rates as high as 150% a year. While most platforms allow borrowers to prepay within a month, creditors still pay the full amount plus interest.

Amendments in the CBK Act will help shield consumers from high-interest rates as well as offer transparency on terms of digital loans.

SEE ALSO: Central Bank Unveils Measures to Tame Unregulated Digital Lenders

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Scope Markets Kenya customers to have instant access to global financial markets

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NAIROBI, Kenya, Jul 20 – Clients trading through the Scope Markets Kenya trading platform will get instant access to global financial markets and wider investment options. 

This follows the launch of a new Scope Markets app, available on both the Google PlayStore and IOS Apple Store.

The Scope Markets app offers clients over 500 investment opportunities across global financial markets.

The Scope Markets app has a brand new user interface that is very user friendly, following feedback from customers.

The application offers real-time quotes; newsfeeds; research facilities, and a chat feature which enables a customer to make direct contact with the Customer Service Team during trading days (Monday to Friday).

The platform also offers an enhanced client interface including catering for those who trade at night.

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The client will get instant access to several asset classes in the global financial markets including; Single Stocks CFDs (US, UK, EU) such as Facebook, Amazon, Apple, Netflix and Google, BP, Carrefour;  Indices (Nasdaq, FTSE UK), Metals (Gold, Silver); Currencies (60+ Pairs), Commodities (Oil, Natural Gas).

The launch is part of Scope Markets Kenya strategy of enriching the customer experience while offering clients access to global trading opportunities.

Scope Markets Kenya CEO, Kevin Ng’ang’a observed, “the Sope Markets app is very easy to use especially when executing trades. Customers are at the heart of everything we do. We designed the Scope Markets app with the customer experience in mind as we seek to respond to feedback from our customers.”

He added that enhancing the client experience builds upon the robust trading platform, Meta Trader 5, unveiled in 2019, enabling Scope Markets Kenya to broaden the asset classes available on the trading platform.

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